Thursday, October 30, 2008

It has been a tough year for KQ since their busiest & most profitable quarter (1 April - 30 Jun) was severely affected by the post-election clashes as tourists & businessfolk canceled their flights to/from Kenya.

Hats off that KQ managed to pull together a profitable (though subdued) 1H 2008-9. The prospects for 2H seem encouraging with a weaker KES (90% revenues are in forex) & lower fuel prices. Unfortunately for KQ, the fuel hedges they entered into will reduce the benefits of lower fuel prices.

2008 has seen the demise of many airlines though mostly in USA which is a very competitive market. KQ on the other hand saw increased competition in 2008 from Fly540, Virgin & Air Uganda.

*** There was a major glitch at the NSE. Trading was supposed to start at 12.30pm

Wednesday, October 29, 2008

(All said and done I think many shares are a steal if you have a backbone of steel)

KCB at 16.85 which is a 2x PB and less than 8 PER.

Equity Bank has not seen 114/- for almost 2 years. The price is even LOWER than it was at the height of the violence in 1Q 2008.

Warren Buffett would have a blast in the market & buy up a lot of stuff. I think it might sense for some firms to go private at this point!!!

There is little LBO cash but the possibility of buying out minorities... and then taking the firm private is so tempting. Hey, Unilever Tea (Brooke Bond) did just that!

Look at KQ (29/-) which is trading at a substantial discount to NAV. If they were allowed to buy-back shares, they had KES 12,000,000,000 in cash (2Q 2008 - 31 March 2008), and could buy back 200,000,000 shares at 30/- (KES 6,000,000,000). Suddenly, you have eliminated 40% of the shares thus allowing the remaining shareholders to earn substantially more on their investments!

KCB is at 16.85 & can generate over 13% on the shares based on current earnings. A buy-back would allow an increase in ROE without the need to take on additional risk. Just raise Tier 2 capital when the capital markets improve.

And the list goes on. Finally, ABSA could make a bid for Barclays Kenya. It was too pricey earlier but at 43/-, the price is rather attractive.

If I were Vodafone, I would buy 11% of the shares that gives me effective control of Safaricom so I can consolidate their results. And I can buy them at a rock-bottom price of Kes 3.50!

Equity Bank is in a position to make a takeover bid for HFCK. Offer 20/- & the minority shareholders of HFCK will make a beeline to sell the shares!

Safaricom should make a all-cash (20/-) bid for Access Kenya & in one swoop could own Kenya's largest ISP for corporates as well as the most extensive wi-max network in Kenya. I expect almost everyone except the Somens might be running to sell their shares! Heck, maybe even the Somens!

The cash rich firms e.g. KQ, Safaricom, Equity Bank can do wonders if they deployed the cash they have!

EABL is also cash rich but who would they buy that is complementary to their existing business?

CFC-Stanbic should look at buying out NIC Bank. Or perhaps even NBK now that NBK bad debts are manageable.

How about Equity Bank swooping in for HFCK as mentioned above. Or KCB buying out HFCK in its entirety & roll-up S&L into it?

I do not know if Centum is cash-rich after the recent happenings... but it could buy out 1 or 2 listed firms... if they have the cash!

Of course, we have Williamson Tea & Kapchorua... why do they list as different firms? A combination would be ideal at this stage!

Saturday, October 25, 2008

HFCK raised KES 2.3bn & just in the nick of time. They had the backing of Equity Bank - which had raised KES 11bn in a very smart deal earlier - and BAAM.

I expect HFCK to post solid numbers in 3Q 2008 vs prior quarters. The 'extra' cash can be placed with various banks who are 'short' on cash. Also this sets the stage for a rapid expansion for HFCK into developments for low to medium income earners.

KCB raised KES 5.0bn but the current price has fallen below the Rights price.

I expect the price to recover based on its strong balance sheet & growth prospects outside of Kenya.

I&M Bank raised KES 600mn from a (private) Bond Issue but also attempted to raise another KES 600mn in Tier 1 equity from private sources. I expect it to have been successful since they have PROPARCO & DEG on their board.

Privately held therefore less information available. PROPARCO & DEG can provide access to funds if needed. Expansion into other market segments (new branch in Ongata Rongai) from its traditional 'upper market bank' image. Relies heavily on corporate customers BUT faces increased competition from Diamond Trust Bank & NIC Bank. An interesting addition for I&M Bank is the purchase of 50% of a Mauritian bank.

Co-op Bank wants to raise capital through a New Issue of shares. I expect they will be successful in spite of all the doom & gloom.

I think they will expand their footprint but will they be held back by their co-operative roots? Can they attract additional business from corporates? All said & done, I think the 'increased' privatization of firms that are farmer-owned will benefit Co-op Bank.

Well... after beth mugo (supposedly the minister for public health & sanitation)... but who acts like a total moron... fought with NEMA when they shut down a filthy abbatoir should go look at the the abbatoir AFTER they were forced to do the right thing...

Wednesday, October 22, 2008

For those who don't understand sarcasm or can't hear the dripping through the written word... I think she should not only be fired BUT taken to court! The UN should set an example of zero tolerance & prosecution but it fails miserably...

The UN is one of the world's most bloated & inefficient organizations. An attempt by Michael Bolton to clean up the UN failed since the corruption is entrenched!

Friday, October 17, 2008

The guy's (entire) family works at the NSSF & he is a critic of attempts made to clean up deadwood.

Kenyans should have a choice of NOT investing with/through the NSSF. Yes, they need competition from private providers. I am not saying the private funds will do any better but there should be a choice...

So... NSSF might have lost KES 1.4 billion ($20 million) by dealing through shady brokers... and this is the tip of the iceberg...

BTW... Centum and DSL shared the same office building... hmmm... do you think Centum invested thru DSL as well?

Tuesday, October 14, 2008

Yes... Africa gets a bad rep... and often well deserved but there are interesting & positive developments on the continent...

PiracyNot a good sign but at least it has united the Russians, Ukrainians and Americans... who all want to make sure the pirates don't win out. My solution is simple... BOMB the somalis back to the middle ages... no, even further back... make the coast of somalia a no-sailing zone for anyone who is somali (or even looks like a somali)...UgandaUganda is making efforts to ensure the oil wealth is not wasted or skimmed off like the nigerians do... I do not expect it to be perfect after all theft in Africa seems ingrained among most politicians... but at least they could do much better than the nigerians.

Of course... Uganda is also becoming the transit point for goods to Sudan, Congo and Rwanda...

And Uganda has 4 telecom players while Kenya has only 3. What's more... Uganda is set to have 2 more... HITS and I-Tel.

The same goes for Ghana who have an election this year... who have oil as well as being a transit point was many W.African countries.

Rwanda & CongoRwanda and Congo have a love-hate affair that started when the then Zairean government supported the Hutus against the Tutsis. As is eastern Congo has a strong Tutsi influence. Paul Kagame (prez of Rwanda & a Tutsi) and Laurent Nkunda (a Tutsi general who heads the 'rebels' in eastern Congo) have a dream of 'greater Rwanda' that is Tutsi dominated. After the Hutus massacred over 1 million Tutsis... one can't blame the Tutsis in securing the borders.

That said... there is huge potential in Congo and Rwanda will become a powerhouse if it annexes eastern Congo. Furthermore, the discipline that Kagame exhibits will make Rwanda the pride of Africa. If only they had a seaport... like Singapore.

Ecobank Rights & New IssueEcobank got hit by the financial turmoil & had to extend the Offer to 31 Oct 2008. I hope they can collect the cash they need but poor luck with the timing. I think they should have dual-listed in Kenya as well since they bought 75% of EABS. As is they are listed on the Nigerian Stock Exchange, Ghana Stock Exchange & BVRM.

gaddafiOf course... what would Africa without the crazies? So gaddafi wants to be the king of kings?

Monday, October 13, 2008

Yes... it is true... Discount Securities Ltd has bitten the dust but unlike prior failures (Francis Thuo & Conmen + Nyaga stealbrokers) the CMA is doing a Chapter 11... so the firm will continue in business while another partner is sought to inject funds into DSL.

I think the CMA's actions makes better sense than just closing it down but buyers want a 'clean' license.

Options:

1) CMA & NSE to accept the debts of DSL while suing the current owners for recoveries. Then sell the 'clean' firm to other investors.

2) CMA & NSE to put the firm in receivership & sell the license. Use the proceeds to pay off claims. This is similar to what happened at FT & Co. Best option.

3) Ask buyers to buy the firm 'as is' but with a backstop for losses. This is harder to achieve but saves the CMA & NSE compensation fund lots of moolah. NIC Bank bought 60% of (Not so) Solid Securities & are still paying for it!

It was not unexpected but considering the recent spate of buyouts I am surprised there was no white knight. Of course, as NIC Bank learned that buying existing brokers is fraught with bad debts! Luckily NIC Bank has deep pockets & can buy its way out of the muddle.

Crossfield lucked out in being bought out by ABC Bank... but I think there are 2 more players who remain shaky...

Yes... the safcon IPO problems coupled with the current drop in the market is really decimating the investors and the players!

Monday, October 06, 2008

I have never liked how SafCon would rip us off with horrendous calling charges... so I tried to support KenCell-Celtel-Zain when I could.

I was a classic double/triple SIMmer... I had 3 phones:

- SafCon for SafCon to SafCon (it has the largest subscriber users)- Zain to Zain (occasional use)- Telkom to Telkom (they had corporate reach for intra-company calls)

Now... I am 95% on Zain. I will even return missed calls when I sign up for the "Unlimited Package" between 6am to 6pm. Yes... $1/day buys me 12 hours of unlimited talk time... granted... I start using it at 8am at the earliest & only on Zain... but I can talk & talk & talk...

I was on PAMOJA but since I have to call some (non-progressive) folks on SafCon, I changed (vukad) to VUKA. I miss the 3/- Pamoja but its only 20/- to change tariffs on Zain on weekends.

If only Zain had introduced VUKA before the SafCon IPO... I betcha the over-subscription would have been much lower.

Zain has unlimited - albeit slow - internet access at 3,000/- per month. I currently use SafCon coz of (1) speed & (2) pre-paid but if Zain were to give me 3G... I would vuka that over as well.

When Zain introduces their 1,000/- phone... I expect many more subscribers to migrate to Zain.

There are some hardcore Suffericomers there... but I laugh at them when I can call them at rates 66% lower than they can call me... as is... I hardly call SafCon anyway! My new habit when I have to call anyone on safaricon or orange is... do you have a Zain number????

So... safcon shares may not be as cheap as they seem at KES 4.80...

I have not been paid by Zain... but if Rene Meze is reading this... I am responsible for at least 25 migrations over to Zain...

Thursday, October 02, 2008

So it seems the hijacked shipment of arms & tanks is not all it seems...

Kenya still buys most of its hardware from the West so the Russian tanks via the Ukrainians might not be for Kenya... and if Kenya was the buyer why buy Russian tanks from Ukraine instead of the Russians?

It seems there was another cargo of tanks that were shipped through Kenya to S.Sudan... Now I would not care if Kenya made some 'commission' on the sale but I think the 'commission' will end up in individuals' pockets not the Kenyan military!